Here's my guesses.

1. Since flac is basically a lossless compression format. It does not alter the original data in any way. The file is in a sense, recreated upon playback, or conversion to another format. The flac files can even be higher resolution sample rates than the CD's 44.1 kHz,  There's a lot of music available in 96 kHz these days. Most CD players I run across these days will play 44.1 kHz flac files from disc, no problem, but I still convert my flac's to WAV files before burning a disk, just in case a non-comparable player pops up.

2. N/A

3. I'm not too familiar with dedicated music servers. What I'm doing currently is I have stored my music library on my wireless router's internal 2 TB hard drive, stuck in a closet somewhere. So when I want to play something I use an app on my android phone, "Foobar2000 Remote", to select a track or tracks or playlist, start-stop play, etc...  Upon hitting play, the Foobar2000 program on my $200 netbook (attached to my system's DAC via 1-meter USB cable) loads the track into the netbook's RAM. After several seconds it completes and starts play. The same general type of setup can be used with apple of course, if you're one of those people. Like I said, there are several other ways to go that other people would know about.

4.Yes  As one example a friend feeds the digital signal from his laptop into a Cambridge Audio 840C CD player that has a digital S/PDIF input. He's using a MF V-Link II to convert the laptop's USB output to the S/PDIF required by the 840C. This is an older model, but I'm sure there are others. A general comment is that a lot of people are skipping the CD players these days, and getting an external DAC to convert the digital to analog. Kind of depends on if you prefer more of an all in one box approach to system building, or go for separate components which I think offers more upgrade flexibility.

BTW- Nice choice on the Odyssey amps.

Why a multi-channel system if the sources you are talking about are two channel?

Stick w/ a dedicated CD player.

I agree. Why even try to live in the 21st century when one can just stick one's head in the sand and stay in the past.Just think of all the fun you will have going to yard sales looking for CDs once they are no longer being made. Then there's all those lovely CD racks which you need to buy thus keeping a few manufacturers in business. And nothing beats having to carry the CDs from room to room or house to house or house to car instead of either streaming the music from a central location or transferring it via the internet or small flash drives.

So yes CDs are the way to go!

#4:   Oppo BDP-105

Magic is right there in the name.  What more would you like?

Seriously though, the minute I have the extra skrill, that's the direction I'm moving in.

Hey!  What's wrong with sticking one's head in the sand!?

ASll this time I never realised exactly what your avatar meant but now I know! A true audiophile!

..is Swedish for ostrich.  If it made you smile its job is done :)

There are ostriches in Sweden? Who knew? :)

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